The Berlin-based language learning service Babbel is due to go to the Frankfurt Stock Exchange at the end of September. But just days before its first listing, the company pulled the plug on the developing debt crisis in Evergrande that was making global stock markets very jittery. It has yet to announce a new date, but as Babbel CEO Arne Schepker told me, the company continues to monitor the markets.
However, the cancellation of the IPO was clearly unexpected for everyone. “It was disappointing for the team working on it – worked hard and long – and we did very well,” said Schepker. “We had our books covered, we were on the right track, met over 100 super-interesting investors, got fantastic feedback – then the Evergrande situation unraveled, which pulled the plug on most IPO markets. We were facing a very deliberate choice: do we launch ourselves in that market, yes or no?”
Schepker is convinced that the company made the right decision, something the team was able to do because Babbel is well-funded and has a lot of money in the bank, as well as other financing options to continue investing in its products and making acquisitions as opportunities arise. .
One of the company’s fastest-growing businesses is its live classes, which complement the service’s app-based language learning tools. Babbel Live was launched earlier this year and saw a 300% increase in subscriptions and a 400% increase in revenue in the second half of 2021 compared to the first half. With tens of thousands of students, Babbel Live now has 15,000 lessons per month and Schepker tells me that for about 25% of these students, the live platform is the first point of contact for these users, while 75% gets started with the app.
Babbel Live and the company’s B2B Babbel for Business services now account for 9% of the company’s revenue. And things are looking good overall, too, with billable sales in November of over $20 million, up 30% from 2020.
It helps, Schepker noted, that the company is able to recruit some of the best teachers, thanks to its reputation for a quality product. “We are pushing the boundaries of innovation and have always sought to get the best out of human intelligence and artificial intelligence. So we’re not fully human and we’re not fully technical, and I think that’s what makes us so attractive for live tutoring for classroom teachers,” he said.
As for the B2B side of the business, Babbel signed up 5,000 new business students in November and the company is now partnering with more than 1,000 companies. It took Babbel a while to build this company, which for a long time was only available in Germany and only recently expanded to Italy. The plan is to expand it to other European markets soon and then to the US as well. Schepker noted that corporate language learning accounts for about a third of the total language learning market, so this is quite a growth opportunity for the company.
Looking ahead, the Babbel team is specifically looking at how it can create more integrations between its different platforms, so that a teacher on Babbel Live, for example, can see what a student has learned in the app between classes. Add to that Babbel’s podcasts, in-app games, and other touchpoints, and Babbel already offers a pretty rich ecosystem of language learning tools. Now the question is how it can bring all that into a more cohesive platform.
“Users tend to put together their own ecosystem of learning methods, but I call that creative chaos because we’ve never really learned how to do that — and it’s not integrated,” Schepker said. “So the different learning methods don’t have the advantage of knowing what Arne just did with his app when Arne walks into a classroom. That is the added value we see in the ecosystem, for the learner as well as for the teachers and for us as a language learning company: to make sure that we can really take you further in your learning journey because we put your ecosystem together for you. “